White-collar crime fighter Eva Joly takes on IceSave

By Caroline de Gruyter

Eva Joly is a member of the European parliament who has made it her mission to
fight white-collar crime.

Eva Joly is dressed in a soft sweater and velvet pants. Blonde curls spring up
above her face. But don’t let looks deceive you: she is one of the most
committed white-collar crime fighters in Europe. Joly, a French-Norwegian
binational, was the best known investigatory judge in France in the mid
1990s. Back then, she handled the Elf-case, a scandal involving the oil
multinational that revealed corruption at the highest levels of power in
France. In those days, Joly went nowhere without her bodyguards.

Since June, Joly (66) has been a member of the European parliament,
representing the French Europe Écologie party (led by Daniel Cohen-Bedit).
In her capacity as chair of the Committee on Development she has been keen
to take on the rampant tax evasion by multinationals. She is also advising
the Icelandic public prosecutor, who is looking to build a criminal case
against the bankers that bankrupted the island nation in 2008.

After the Elf-affair, have you come to distrust multinationals?

“That is beside the point. Elf was about corruption. What worries me now is
something different: that many people see taxation as an evil, that taxes
are there to be reduced and that this is okay. But it is not okay: tax money
is needed to build our roads, run our hospitals and public transport:
services in the public interest.”

How much are governments missing out on?

“In France, businesses are supposed to pay 33 percent tax, according to the
law. In reality, only small companies do. The big ones use well known trick
to evade taxation. Large companies in France pay only 13 in taxes, opposed
to 33, which costs the state 100 billion euros annually. That amounts to two
thirds of the 140 billion euro budget deficit.”

According to Joly, large companies create complicated global webs of related
subsidiaries that they use to funnel profits through using well known
techniques called ‘round tripping’ or ‘transfer pricing’.

“A huge part of world trade takes place within these multinationals. Alcatel,
Philips: they all do this.”

Why hasn’t anybody put a stop to these practices?

“One reason is that states compete amongst themselves to attract
multinationals, reducing tax rates across the board: a race to the bottom.
Norway is one of the few nations trying to do the right thing. Norwegians
pay a lot of taxes and demand good services in return.”

Is that something only rich countries can accomplish?

“In Norway, where good statistics are available, the Bergen Business School
discovered that a multinational turns over 30 percent less than a Norwegian
company doing exactly the same. One would think the opposite would be true,
because improved efficiency is supposed to be the reason for mergers and
take-overs, but guess what is causing this 30 percent difference?
Tax-evasion. If this is hard to prove in a non-corrupt, rich country like
Norway, can you imagine how difficult it must be in Zambia or Nigeria?
Multinationals can go about their business unhindered there.”

What should those countries do then?

“Never do business without help from countries like Norway. Oslo has sent
advisors to Zambia as a form of development aid. They help national
authorities there to negotiate better contracts with multinationals. That’s
a start. The problem is: European politicians are hardly aware of this. I
hope that the European parliament will start paying attention. By the way,
the Netherlands are not helping in this respect, because of their harmful
tax laws favouring holding companies. According to the Center for Research
on Multinational Corporations, a Dutch NGO, the Netherlands comes second
only to America in terms of direct foreign investment. That might sound
crazy for such a small country, until you figure out that most of these
companies are Dutch in name only. What do these companies earn you? Thanks
to your good recordkeeping this is well documented: 1.8 billion euros a
year, only 0.8 percent of your GDP. That is the same amount you spend on
development aid, which is undercut by this practice. A lot of these
letterbox multinationals, officially based in the Netherlands, do business
in Africa. Can’t the Netherlands do without them?”

Is this what your work in Iceland is about?

“Absolutely. The handful of banks that led that island to its doom are all
private enterprises. When they collapsed, at the end of 2008, they had ten
times more money in their current accounts than the state. The government
was left powerless. There are about 330,000 Icelanders and most of them had
nothing to do with this. But now the banks’ deficits have become the state’s
deficit, affecting everybody. This is theft of public money.”

How is the investigation coming along?

“I cannot say much. The investigation is in progress and might take a couple
of years.”

The Icelandic president does not feel that Iceland should repay the
Netherlands and the UK back the damages incurred by IceSave’s demise. What
is your opinion of the Dutch and British insistence that they do?

“The Netherlands and the UK are being arrogant. They are asking for 2.7 and
1.3 billion euros respectively at 5.5 percent interest. But Iceland’s public
debt amounts to 300 percent of GDP. They will never be able to pay back the
whole amount.”

Still, Dutch money has vanished.

“Yes, but the Dutch need to understand that it is both unrealistic and
unreasonable to demand everything be repaid with so much interest, and to
make this a condition for Iceland’s entry into the EU. What IceSave did was
wrong, but the Dutch and the British are also partly to blame. All business
was conducted through IceSave’s branch offices. The Dutch and British
financial regulators said: these branches are not covered by our
jurisdiction because they are the Icelandic supervisor’s responsibility. But
everybody knew there was no way a handful of people in Reykjavik would be
able to supervise properly what was happening in Amsterdam and London.
According to a European directive, EU countries should regulate
multinationals from outside the EU operating on their territory just as
strictly as home-grown enterprises.”

Meaning the Dutch supervisor was negligent?

“To a certain extent, yes. The Dutch were supposed to ensure that the
regulators in Reykjavik were doing a proper job, which they weren’t. The
Netherlands has tried to cover its tracks citing IceSave’s legal status.
Scandalous, really.”

How will this all end?

“If you do not meet Iceland halfway, only fishermen will remain on the island
and you still won’t have your money back. The brain drain has begun: 8,000
highly educated people have already left the island and more will follow. It
is not in our interest to impoverish Iceland. It has natural resources we
might need in the future and it has a strategic location. We should not
bully them, but negotiate, in a more grown up and proper fashion than we are
currently doing.“